Research & News

Our collective relationships with global, national, and local brands provide us with the insight and ability to assist by providing best practices on many business issues we are all facing. Many established brands find themselves in uncharted territory, never fathoming having to send their landlords letters indicating that sales would be impacted by as much as 50-100%. Mom & Pop operators are also fearful for their livelihoods and need more clarity in order to make informed, long term decisions. Most Landlords we are speaking with have explained that they are working on processing tenant requests. Many ‘Essential Retailers’ are reporting robust sales, but are facing logistical challenges while placing the greatest emphasis on keeping their employees and customers safe and healthy. In the restaurant category, franchisors are reportedly providing franchisees temporary waivers for royalty fees. Many restaurants with drive-thru windows are experiencing reduced sales while restaurants with delivery and pick up only options are being impacted even greater. On the flip side, we are seeing a few restaurants expressing interest in “prime  locations” even if it was not their strategy previously. Landlords are providing many different approaches to “rent relief” scenarios, but short term rent deferrals with tenants paying relief back over a short period of time with details varying on a case by case basis are currently the most common.  Regardless of the property or portfolio, there isn’t a formula approach on how landlords are responding to tenants. Responses are based on factors such as landlord debt, lease term, coupon vs market rent and so many other factors. In the lender community, debt is much harder to obtain. Rates have decreased while spreads have increased  and due diligence parameters have tightened. We are seeing examples of mortgage relief being provided from select lenders on an individual basis, as well as on a portfolio level. Several lenders are offering interest only payments for 30-90 days or even restructuring loans, in certain cases, which include life insurance companies and credit unions.While transaction volume has considerably decreased or delayed, we are still seeing leasing activity for select brands in the restaurant, fitness, financial, grocery, dollar store, health care, auto parts, education, footwear and convenience store categories. However, brands that continue to process leases are concerned about delays relating to governmental approvals, tenant improvements and travel restrictions. Surprisingly, construction is reportedly moving faster with a renewed sense of urgency and easier access in and around job sites that may have otherwise been more challenging to navigate prior to ”Social Distancing”.While much remains uncertain, one certainty is that this pandemic will pass and the consumer will emerge with a greater demand for socialization and connection. In the interim, we all need to work respectfully and intelligently to overcome short term challenges by implementing thoughtful long term and sustainable solutions.We are available to you as a resource today and always.

Respectfully, Beta

First, I hope you and your family are well despite these unprecedented times. As we learn more about the impact from COVID-19 and the “Shelter in Place” ordinance, Beta continues to be fully operational and committed to serving our clients. Since our inception, we have been equipped with secure cloud-based technologies and all of our resources continue to be remotely available to our clients.Collectively, we have made approximately 1,500 calls last week and have had many informative conversations. We have been intentional in asking a variety of questions to gather as much information as possible given our “boots on the ground” insight for submarkets for California and throughout North America. We encourage you to keep the questions coming whether it be on an industry or site specific level.While existing transaction momentum and volume have been severely impacted this past week, we are pleased to report that many transactions continue to forge ahead. We are working with several retail, medical, and food service brands that are still engaged and want to transact.While we have experienced reduced retail sales in prior economic cycles, we have not experienced temporary store closures on a mass scale. It has been reported that publicly held chain retailers that have closed stores temporarily throughout the US exceeded 34,000 stores and over 600,000,000 square feet.As economic abatement discussions are occurring on many levels, we believe that it is essential to communicate effectively with all stakeholders and that this is not the time to “bury our heads in the sand” and simply wait it out. While each negotiation is unique, the issues at hand are similar in most situations. We suggest that any solutions for short term inducements should also consider other long term concessions to benefit each party.We believe the following are best practices when communicating with stakeholders to address financial and operational issues for landlord, tenant, and lender agreements.

Be proactive, communicate in a spirit of partnership. Be supportive, positive, and sensitive to individual circumstances. Listen to the entire story. Do not wait for stakeholders to reach out to you. Be proactive! Listen to the entire story. This is a unique time and while not everyone will respond in a similar or equitable manner, the approach is essential to being able to inform your other stakeholders.

Educate, review and understand documents governing your business and contractual relationships. Circumstances are changing daily and, in many cases, hourly. The ability to receive financial support from Federal programs, insurance companies, and lenders etc. are going to provide opportunities for stakeholders to recover.

Obtain financial and operational information. Gather sales reports and financial statements including status of existing business plans to review during the “Shelter in Place” ordinance.

Request an offer. Many are just saying “I Can’t”, but it is important to understand if a request is being made for an abatement, a concession or a rent deferral. Whatever it is, get it in writing.

Team approach to problem solving. Use your resources to help make calculated and informed decisions. Beta is a resource to you and will continue to be a trusted advisor today and always.

It is our belief that our nation’s leadership will come together to provide significant financial aid for our industry. A compelling reason to include the shopping center industry is that approximately one in four jobs nationally are related to retail. Federal legislation on the relief bills are circulating to incorporate business interruption for tenants. Please click here and follow the prompt to transmit your message to quickly communicate with your elected officials in Washington D.C. Additionally, Congress is actively negotiating a significant financial aid package that we believe will also have a tremendous impact on lease and loan adjustments. The SBA website outlines a loan relief program.The role of the shopping center has been evolving for several years. Changes in consumer behavior will further accelerate how shopping centers are operated and merchandised in the future. It is more crucial than ever that we have access to real time data and insights to create solutions for common challenges. As concessions are being requested, it will be essential to consider greater flexibility in the operation of shopping centers in the future.Finally, our industry, like our country, is strongest when we work together as a cohesive team. We remain confident that thoughtful communication and goodwill will enable long term prosperity for our industry.As always, Beta is available to you as a resource. We appreciate the opportunity to collaborate with you to overcome the challenges through thoughtful problem solving.Respectfully,Beta

It’s estimated that more than 44,000,000 smartphone owners in the US will use food delivery apps this year, an industry that is valued at $16.6 billion, with projections to grow to $365 billion by 2030. With the number of users having grown from in 31.4M in 2018 to 38M in 2019 restaurants have shifted their business models to adapt to the rapid growth of customer demand via third party delivery apps. In response to rising demand and coinciding with the growth of food delivery apps, 2019 saw the evolution of the ghost kitchen concept (also referred to as a virtual kitchen, dark kitchen, or cloud kitchen), a trend that will certainly carry over and proliferate in 2020.A ghost kitchen serves as commercial kitchen space for one or multiple concepts under one roof, where food is cooked and prepared to then be picked up and delivered by a third-party delivery service such as Postmates, DoorDash, GrubHub, or Uber Eats. With a focus on delivery, most ghost kitchens do not have space for walk-in customers or space for dining, and from a real estate perspective, are often industrial in nature. Some of the major players in the ghost kitchen space are former Uber CEO’s CloudKitchen and Pasadena based Kitchen United.In October 2019, DoorDash vertically integrated and opened their own ghost kitchen – DoorDash Kitchens – in Redwood City. DoorDash Kitchens is a 6,300 square foot shared space that is currently partnered with Chick-Fil-A, The Halal Guys, Humphry Slocombe, Rooster & Rice, and Nation’s Giant Hamburger. DoorDash worked with each brand to customize and build-out their stations to fit their individual needs. An order is placed via the DoorDash app, the food is prepared, a driver picks up the order from DoorDash Kitchens, and the food is back out for delivery.Ghost kitchens are proving to offer many operational benefits to restaurant operators. Ghost kitchens relieve pressure on traditional customer-facing restaurants by providing operators with a satellite kitchen to focus on meeting the growing demand for delivery while allowing greater speed and service for dine-in or carry-out customers. Also, by diverting delivery drivers to ghost kitchen locations, parking is also freed up at dine-in locations, creating greater convenience for customers.From a real estate perspective, the primary cost-saving benefit is that ghost kitchens allow restaurant operators to meet demand via a smaller footprint while taking away expensive build-out costs. In the case of DoorDash Kitchens, DoorDash went through the arduous process of getting operating permits from the city and took on the cost of building out suites, allowing the restaurant operators quicker and cheaper entrances into a new market. Additionally, by allowing introductions to new markets with less initial investment and thus risk, restaurants are able to test new markets through delivery before signing long term leases.Looking ahead, as the delivery industry continues its rapid growth, so will ghost kitchens. Kitchen United, which recently received $10M from Google Ventures, aims to build 400 ghost kitchens with over 5,000 kitchens in the next few years. Additionally, following suit of DoorDash, delivery service companies will continue to vertically integrate and venture into the ghost kitchen space. Finally, the rise of the ghost restaurant, or virtual restaurant is poised to grow as well – restaurants serving customers exclusively via online orders.Jake Radeski was recently interviewed by the Los Angeles Business Journal about ghost kitchen trends, read the full article here: https://labusinessjournal.com/news/2020/apr/27/ghost-kitchens-restaurants-delivery-opportunities/